Alaska Legislature Grapples with Tight 2026 Budget Amid Cuts and Concerns

By Anna Lionas

The Alaska Legislature is racing against the clock to finalize the state operating budget for 2026, with the session set to conclude on May 21. The latest proposal includes a $1,000 Permanent Fund Dividend (PFD)—the lowest in history when adjusted for inflation—costing approximately $635 million. This represents over 10% of the general fund budget, driven by lower oil revenues and a push to increase school district funding.

To stay within revenue limits, the Senate’s budget cuts early education programs, road maintenance, and state prisons. The House rejected the Senate version, advocating for a larger $1,400 PFD but lacking the necessary revenue to support it, leading to negotiations in a bicameral conference committee.

Senate leadership, wary of utilizing savings, favors spending cuts, including a PFD smaller than the statutory $3,800. On May 7, Sen. Lyman Hoffman (D-Bethel) emphasized the need to preserve the rainy-day fund for potential challenges ahead, highlighting three major budgetary threats.

Firstly, federal funding cuts could impact Alaska’s budget by over $300 million if even a 5% reduction occurs in the approximately $6 billion received annually. Secondly, oil price fluctuations could further complicate financial forecasting, with predictions suggesting an average oil price drop to $64 per barrel in 2026, decreasing state revenue by an estimated $120 million to $160 million.

Lastly, an anticipated increase in employee salaries could add between $100 million and $150 million to costs. Collectively, these challenges could lead to a shortfall of up to $750 million next year, complicating future budget decisions.

As the conference committee convenes to find middle ground, lawmakers emphasize that funding early education and a larger PFD are crucial for their constituents. The finalized budget will eventually require approval from Governor Mike Dunleavy.